Mutual funds bet big on manufacturing: Is it time to invest?

livemint.com:

MUMBAI : Sectoral and thematic funds received over ₹19,000 crore in net inflows in May, according to monthly data from the Association of Mutual Funds in India (Amfi). Nearly half of this amount went into HDFC Mutual Fund’s new fund offer (NFO) – HDFC Manufacturing Fund, which alone garnered ₹9,500 crore from investors. It's not just HDFC MF riding this wave; other fund houses have also launched manufacturing funds recently.

Baroda BNP Paribas MF introduced its manufacturing fund on June 10, while Mahindra Manulife MF launched its manufacturing fund at the end of last month. Additionally, Motilal Oswal MF and Invesco India MF have filed for manufacturing funds with the Securities and Exchange Board of India (Sebi). Fund managers cite both global and domestic factors as drivers for the manufacturing sector in India.

The push towards diversification from China as a manufacturing hub is creating opportunities for economies like India to fill the gap. “The global shift towards the China+1 sourcing strategy presents an opportunity for Indian manufacturers to be relevant in global manufacturing," says Krishna Sanghavi, chief investment officer of Mahindra Manulife MF. "Manufacturing in India currently contributes only 17% to the country’s gross domestic product.

With the government's continued focus on initiatives like 'Make in India' and 'Atmanirbhar Bharat,' along with the product-linked incentive (PLI) scheme, acting as a substantial booster, manufacturing is likely to benefit," he says. The government's focus on increasing import substitution by boosting domestic manufacturing is also a significant factor. India’s non-oil and non-gems and jewellery imports were $422 billion in fiscal year 2024 (FY24).